Assume the Current Spot Rate Is C$1

question 64

Multiple Choice

Assume the current spot rate is C$1.2103 and the one-year forward rate is C$1.1952. The nominal risk-free rate in Canada is 3 percent while it is 4 percent in the U.S. Using covered interest arbitrage you can earn an extra _____ profit over that which you would earn if you invested $1 in the U.S.

• A)$0.003
• B)$0.006
• C)$0.008
• D)$0.015
• E)$0.018

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Definitions:

CD-Rom Drives

Hardware devices used to read data stored on CD-ROMs, commonly used for media and software distribution before the digital era.

World Price

The price at which goods are bought and sold in the global market, influenced by factors such as supply, demand, and trade policies.

Imported Oil

Oil that is brought into a country from abroad for use in domestic markets, often subject to tariffs and trade agreements.

Queuing

The process of people or items lining up in a sequence to await their turn for service or processing.